2007 (5) TMI 55 - SC - Central Excise

Supreme Court exempts appellant's aluminium castings, refunding duty, extended limitation wrongly invoked.

The Supreme Court held that the appellant's aluminium castings, initially classified under CSH 8432.00 but claimed to fall under CSH 8409.00, were exempt ... Classification – Department contended that appellant good fall under the Chapter heading 84.09 but as per appellant fall under the heading 84.32 – Held that department contention is not correct and appellant good classified under heading 84.32 Issues involved:1. Classification of aluminium castings under Central Excise Tariff Act.2. Invocation of the proviso to Sec. 11A(1) of the Central Excise Act, 1944.Classification Issue Analysis:The appellant was manufacturing aluminium castings used in IC engines for agricultural machinery, initially classified under CSH 8432.00. However, a show cause notice claimed they should be classified under CSH 8409.00, demanding differential duty. The appellant conceded that the castings fell under CSH 8409.00, which covers parts for engines. The dispute centered on whether the castings, used in IC engines dedicated to agricultural machinery, were exempt under Notification No. 111/88, which exempted parts of agricultural machinery. The appellant believed they were covered by this exemption due to the genuine belief that their goods were included. The Supreme Court found merit in this contention, noting the appellant's genuine belief and lack of intent to evade duty. The Court also considered the approval of the classified list by the department and the recommendation by a State PSU, Kamco, to classify the castings under CSH 8432.00. Ultimately, the Court held that the castings fell under CSH 8409.00 but that the extended period of limitation should not have been invoked, leading to the refund of the deposited duty.Proviso to Sec. 11A(1) Issue Analysis:The second issue revolved around the invocation of the proviso to Sec. 11A(1) of the Central Excise Act, 1944, which allows for an extended period of limitation for duty recovery. The Court determined that the department was not entitled to invoke the extended period of limitation due to the appellant's genuine belief in the exemption notification and lack of intent to evade duty. Additionally, the Court highlighted that even the State PSU, Kamco, recommended the classification under CSH 8432.00, and the department accepted Kamco's explanation. Therefore, the Court set aside the tribunal's decision to recover the differential duty beyond the limitation period and ordered the refund of the duty deposited by the appellant. The civil appeal was allowed, and another related appeal was dismissed as infructuous.This detailed analysis of the Supreme Court judgment highlights the classification and limitation issues, the appellant's genuine belief, the department's actions, and the ultimate decision leading to the refund of deposited duty.